PELTAN DEVELOPMENT, INC., PATROCINIO E. MARGOLLES, EDGARDO C. ESPINOSA, VIRGINIA E. VILLONGCO, LUCIA E. LAPERAL, NORMA C.

Peltan Development versus Court of Appeals

The Case

This is a petition for review of a Court of Appeals decision that had reinstated a complaint for cancellation of titles and damages which the trial court had dismissed. The private respondents, applicants for a free patent over a parcel of land in Las Piñas, sued Peltan Development and several other defendants to cancel their Torrens certificates of title on the ground that these were all derived from a supposedly fictitious original certificate of title. The case matters because it settles two things a reviewee must know: first, that in resolving a motion to dismiss for failure to state a cause of action, a court must still take judicial notice of and apply a Supreme Court decision promulgated before it rules, even if that decision came after the motion was filed; and second, that in an action to cancel a Torrens title, the real party in interest is the Government, not a private individual who does not assert a private right of ownership.

Procedural History

The private respondents filed their complaint for cancellation of titles and damages before the Regional Trial Court of Pasay City, Branch 112, and later amended it to implead an additional defendant. Defendant Peltan Development filed a motion for preliminary hearing on affirmative defenses, contending that the complaint stated no cause of action because the plaintiffs were not the real parties in interest. The trial court granted the motion to dismiss, holding that the Government, represented by the Office of the Solicitor General, was the real party in interest and that the plaintiffs therefore had no cause of action. The private respondents appealed. The Court of Appeals reversed and set aside the dismissal order and directed the trial court to try the case on the complaint against all defendants, holding that the two elements of a cause of action were present and that the case should have been treated as an accion publiciana, a suit to determine who has the better right of possession. The Court of Appeals denied the petitioners' motion for reconsideration. The petitioners then came to the Supreme Court by petition for review.

Facts

In February 1981, the private respondents filed a complaint against eleven defendants, later amended to include a twelfth. They alleged that they were applicants for a free patent over a parcel of land of about 197,527 square meters in Barrio Tindig na Manga, Las Piñas, Metro Manila. They claimed they had occupied and cultivated the land for many years until persons led by defendant Edgardo Espinosa bulldozed their crops, houses, and improvements and forcibly drove them out. They had filed their free patent application with the Bureau of Lands in May 1976 and had the land surveyed on the strength of a survey authority issued in December 1976.

They alleged that the processing and approval of their application were obstructed by the existence of several certificates of title in the names of the defendants, including Peltan Development. They claimed that all these transfer certificates of title were derived from an original certificate of title registered in the name of the Spouses Lorenzo Gana and Maria Juliana Carlos in 1929, which they discovered to be fictitious and spurious. Hence, they prayed that the defendants' transfer certificates of title be canceled or declared null and void, and that damages be awarded.

Peltan Development moved to dismiss, invoking the ruling in Gabila versus Barriga that in an action for cancellation of certificates of title the Government, through the Solicitor General, is the real party in interest. The trial court agreed and dismissed the complaint. Unknown to the trial court at the time, the Supreme Court had already upheld the validity of that same original certificate of title and the titles derived from it in a decision promulgated in February 1994, before the Court of Appeals rendered its own decision in June 1994. The Court of Appeals nonetheless reversed the dismissal without considering that ruling.

Issues

• Whether or not the Court of Appeals, in resolving a motion to dismiss for failure to state a cause of action, should take judicial notice of and apply a Supreme Court decision promulgated after the motion was filed and ruled upon by the trial court.
• Whether or not the invocation of such a decision violates the rule that a motion to dismiss based on lack of cause of action should be ruled upon only on the basis of the allegations of the complaint.
• Whether or not the private respondents are the real parties in interest in an action to cancel a Torrens certificate of title.

Applicable Provisions

Section 1 of Rule 129 of the Rules of Court provides:

SECTION 1. Judicial notice, when mandatory. — A court shall take judicial notice, without the introduction of evidence, of the existence and territorial extent of states, their political history, forms of government and symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the political constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of the Philippines, laws of nature, the measure of time, and the geographical divisions.

This provision bears on the case because the Supreme Court's decisions are official acts of the judicial department, so every court must take judicial notice of them and apply them in resolving a dispute.

Ruling

On the first issue, the Court held that while the existence of a cause of action is determined by the allegations in the complaint, a court has a mandate to apply relevant statutes and jurisprudence in determining whether those allegations establish a cause of action. A court cannot disregard decisions material to the proper appreciation of the questions before it. Every court must take cognizance of decisions the Supreme Court has rendered because they are proper subjects of mandatory judicial notice under Section 1 of Rule 129. These decisions form part of the legal system, and a court's failure to apply them is an abdication of its duty to resolve a dispute in accordance with law and a ground for administrative action against an inferior court magistrate.

On the second issue, the Court held that taking judicial notice of such a decision does not violate the rule limiting the resolution of a motion to dismiss to the allegations of the complaint. The Court noted that it had already upheld the validity of the original certificate of title and the titles derived from it in a decision promulgated in February 1994, ahead of the Court of Appeals decision in June 1994. It was incumbent upon the Court of Appeals to take judicial notice of that ruling and apply it. Because the private respondents' claimed right rested on the allegation that the petitioners' title originated from a fictitious original certificate of title, and that title had already been upheld, the first element of a cause of action, the plaintiff's right, was not present. Treating the suit as an accion publiciana was an exercise in redundancy because the same issue had been foreclosed. Allowing repeated suits to nullify the title would bring to naught the indefeasibility of titles under the Torrens system.

On the third issue, the Court held that the private respondents were not the proper parties to initiate the suit. Although they did not pray for reversion of the land to the Government, the prayer for cancellation would have the same result of reverting the land to the Government under the Regalian doctrine. The Court quoted Gabila versus Barriga:

Thus, if there is any person or entity to relief, it can only be the government.

Since the private respondents made no pretense that any part of the land was privately owned by them or their predecessors-in-interest, whatever right might have been violated belonged to the Government, not to them. Having ruled that the private respondents were not the real parties in interest, the Court found no need to pass upon the question of nonpayment of docket fees.

Doctrine

A motion to dismiss for failure to state a cause of action hypothetically admits the truth of the factual allegations of the complaint, and the existence of a cause of action is determined by those allegations. Nevertheless, a court must take judicial notice of Supreme Court decisions, which are official acts of the judicial department under Section 1 of Rule 129, and must apply them even if promulgated after the motion was filed. A decision upholding the validity of a Torrens title forecloses later suits seeking to nullify that same title, consistent with the indefeasibility of Torrens titles. In an action to cancel a Torrens certificate of title, the real party in interest is the Government, because cancellation would revert the land to the public domain under the Regalian doctrine, and only the Government, through the Solicitor General, may seek that relief.

Disposition

The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the trial court's dismissal of the complaint.

Remember This

The single line worth memorizing: a court resolving a motion to dismiss must take judicial notice of and apply Supreme Court decisions, and in an action to cancel a Torrens title the real party in interest is the Government. Examiners like to use this case on the mandatory judicial notice of Supreme Court decisions and on the real party in interest in cancellation of title suits.